Consistent Estimation of Censored Demand Systems Using Panel Data

David Sahn

American Journal of Agricultural Economics, 2005, vol. 87, issue 3, 660-672

Abstract: We derive a joint continuous/censored commodity demand system for panel data applications. Unobserved heterogeneity is controlled for using a correlated random effects specification and a generalized method of moments framework used to estimate the model. While relatively small differences in elasticity estimates are found between a flexible random effects specification and one that restricts the random effect coefficient to be time invariant, larger differences are observed when comparing the flexible model to a pooled cross-sectional estimator. The results suggest the limited ability of such estimators to control for preference heterogeneity and unit-value endogeneity leads to parameter bias. Copyright 2005, Oxford University Press.

Date: 2005
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